tv Nightly Business Report PBS September 6, 2011 6:30pm-7:00pm PDT
>> tom: from slow growth to no growth. recession chatter heats up again today. >> my forecast right now is for a modest pullback. so, a recession, but a mild and rather short-lived one. as consumers pull back, businesses pull back. >> susie: we'll take a look at why the u.s. might still be able to avoid another recession. it's "nightly business report" for tuesday, september 6. this is "nightly business report" with susie gharib and tom hudson.
captioning sponsored by wpbt >> tom: good evening and thanks for joining us. america went back to work today and investors went back to selling. the familiar jitters about a recession in the u.s., and worries that europe's debt crisis could get worse triggered the selling, susie. >> susie: tom, right from the open of trading here at the new york stock exchange, stocks plunged. blue chips were down as much as 300 points, but by the closing bell the dow pared its losses, off only 100 points. the nasdaq fell 6.5 and the s&p dropped nearly nine. and investors ran for cover to the bond market, buying up 10-
year treasuries bills. the yield dropped to 1.9%, the lowest its been since the 1940s. >> tom: investors seem willing to accept no return on their money because they're worried about a recession. but, as suzanne pratt reports, there are reasons the u.s. can still avoid one. >> reporter: from wall street to main street, talk of another recession is heating up. many economists now put the risk of a double dip in the coming months at about 50%. while that's bad news, it's still a 50% chance of not having one. so let's cheer ourselves up and consider why recessionland may not be our next stop. economist julia coronado says if we skipped a recession, it would be because consumers still go shopping even though sentiment data shows they're blue. >> sometimes consumers just say they don't feel very positive but they spend anyway. and that's possible that we could see that this time around.
>> reporter: likewise, businesses may surprise us and finally start to hire. economist joe davis says that would be because corporate balance sheets are strong and inventories are too lean. >> companies, by and large, have the ability to spend and invest. the question, quite frankly, is the willingness. this is not to lay blame or judgment-- there's a great deal of uncertainty >> reporter: davis also says the housing market is already so weak it can't do much further damage to the economy. >> just in terms of its impact on, say, g.d.p. or the job market, it's just fairly low. in fact, in many ways, other sectors of the economy, such as agriculture, are now more important on a percentage of output than even housing. >> reporter: and, finally, some say america's fragile economy could get some help from overseas. while europe is unlikely, we might see a reacceleration of growth in emerging markets. >> then, especially, the manufacturing and the parts of the economy that are exporting
and facing emerging markets benefiting from that growth. those could start to see a turnaround as well. >> reporter: to be sure, it's getting harder for experts to detail why we're not headed for recession. but, the good news is that there's still a list of possible reasons. suzanne pratt, "nightly business report," new york. >> susie: joining us now, mohamed el-erian, c.e.o. of pimco, the world's largest bond fund. >> i think we can avoid t. it's possible to avoid t but there isn't much time. the economy if left to its own devices will go into recession. the consumers don't have the will to spent. companies have the wallet to spend, but not the will.
>> we depend right now on washington, d.c. and the policy makers in >> susie: and to what extent is the u.s. economy hostage to the problems in the europe. >> we live in a globalized world, and it makes the challenge even more. i think we still control our destiny, but we have to move quickly, and president obama's speech on thursday is mission critical. >> susie: talk about president obama's speech. the president will outline a job plan that will have an immediate impact. will it be anything different then what we heard from him before? >> it's something everybody in the market will be lookingalt. so far, they haven't. and i think they are finally getting to the point of understanding that these are
deep rooted issues. they are not cyclical. and the fed is coming to that understanding. second. do they have the instruments to address it? i think the fed has basically run out of instruments, but president obama has many instruments at his disposal. will he be allowed to use them? that's a political issue. you put all these key things together, i think we're going to hear some good things. but the market will still question can he get them implemented. that depends on congress. >> susie: what are some of the instruments president obama has available to him? >> he can first get the housing market moving a little better. things like issues, like better refinancing. second, he can get the labor market moving better. everything about the payroll taxes, that's a way to get the
labor market moving. >> and compensate for the fact banks aren't lending and infrastructure lending is personality. and fourthly, he can sell to the country this combination of we have immediate and long term fiscal issue tha we are serious about addressing f. we can deliver on these four things, susie, tell make a big difference to address the recession. >> susie: do you think the unemployment problem is so embedded into the economy that it makes it difficult that any job plan would work? >> i think it would be difficult to make a meaningful change quickly. three numbers change me. first, the average person has been unemployed for 40 weeks. 40 weeks. and the longer you are unemployed, the harder it is to enter the labor market. second, 44% of the unemployed
have been unemployed for more than half a year, and finally, 25%, a quarter of 16 to 19-year-olds are unemployed. if you are unemployed at that age you become unemployable. it's going to take time. >> susie: let me quickly ask you a question about an investment strategy. a few days ago, your colleague, big gross said he made a mistake betting too heavily against u.s. treasuries s. pimco now buying u.s. treasurys and does that make sense given that the yield is 1.9%. >> we understate estimated the consensus in terms of growth, and wouldn't only come towardsment pimco level, but we have more bonds.
>> susie: are you buying them now? >> we have been buying them? >> we're not buying them right now. as an investor it's hard to figure out where to go. are you're worried, you avoid the credit market, and you attempt to go to the safe haven like gold or government bonds, but they have rallied so much in price that there's a question on valuation. i think the average investor is adviseed to stay in cash. it may be zero yield, but the options you have are huge, and there will be brlt buying opportunities down the road, and there's no need to commit to overvalued assets now either in equities or bonds. >> susie: i wish we could talk more. thank you, mohammed. it's a pleasure to have you on
the program. >> my pleasure. thank you, susie. >> susan: we've been speaking with mohammed elerr ran-erian. >> tom: we'll be hearing a lot about employment and job creation this week. republican presidential hopeful mitt romney today outlined his plans to lift the struggling economy and create jobs. romney's ideas come two days before president obama releases his plan for getting the country back on a job-growth track. romney unveiled dozens of specific proposals aimed at fixing the nation's high unemployment rate during an appearance today in nevada. among them, a lower corporate tax rate and eliminating capital gains taxes. unemployment remains a top concern across the country, but in one part of the u.s., employers say they cannot find enough skilled workers to fill their job openings. our silicon valley reporter, robin mcelhatton, explains. >> reporter: there are more workers on silicon valley roads looking for jobs than in many other parts of the country. the valley's unemployment rate is considerably higher than the national number.
in san jose, almost 10.5% of the workforce is without a job, but there are signs that hiring is slowly picking up. high tech companies, especially google, facebook and ebay, have hundreds of job openings. yet some say they can't find enough skilled workers. >> there's definitely a talent war going on in silicon valley today. >> reporter: dion lim runs simplyhired.com, one of the nation's largest job search engines. he says engineers and programmers are in short supply and high demand. that's because not enough american students are interested in math and science, and u.s. immigration policy caps the number of foreign workers. >> in silicon valley right now there are about 40,000 to 50,000 engineers, computer software engineers and programmers. simplyhired.com has 16,000 job listings for those positions. so, for every three engineers who are employed, we have one open position. over the last two years, we've seen about a 44% growth in engineering jobs.
>> reporter: the skyrocketing demand for programmers and engineers is driven by new technologies. social media, tablets, smart phones and cloud computing. silicon valley startup seamicro makes servers for cloud computing. c.e.o. andrew feldman says his staff looks everywhere for top talent. >> we are recruiting not just in the u.s., but we are recruiting abroad as well, at top universities. we're going out of the state of california, which is something you hadn't seen start-ups do traditionally. we're going for younger engineers, so you're recruiting right out of a master's program or right out of a ph.d. program. >> reporter: the shortage of engineers and programmers is more acute now, but it's been a problem for silicon valley for a long time. russell hancock, c.e.o. of joint venture silicon valley network, thinks there are three key solutions to the problem, including raising the cap on h1b visas, which allow immigrants to work in the u.s.
>> we need immigrants to come into silicon valley. we always have. that's been our secret sauce. number two, our own kids. we need to get them more interested in these technical careers and, number three, we need to invest in education. right now we're disinvesting in our educational institutions. that's a formula for disaster. >> reporter: simplyhired.com's dion lim, believes that solving the skilled worker shortage could be a formula for success nationwide. >> i think if we had enough engineers, the rate of development of products that would enable other companies throughout the whole united states to operate more efficiently, those things would be rolled out more quickly and we'd generate jobs faster. solutions to finding enough reporter: skilled workers may take years to materialize, but for now, engineers and programmers are in the driver's seat in the silicon valley job market. robin mcelhatton, "nightly business report," silicon valley. >> susie: the carlyle group is planning to raise up to $100
million through an initial public offering. the private equity firm says it will use the proceeds to repay debt and for general corporate purposes. carlyle did not say how many shares it plans to sell or for how much. the i.p.o.'s value may change as banks gauge demand for the stock. meanwhile, groupon is reportedly putting its i.p.o. on hold. the "wall street journal" reports the daily deals website company blames the move on market volatility. groupon has also received questions from the securities and exchange commission about an internal memo that lashed out at critics for questioning its growth and track record. and tom, it looks like investors have cooled off on another recent i.p.o.-- dunkin donuts. goldman sachs told clients today to sell shares in dunkin brands, the very company that goldman brought public as a lead underwriter just a few weeks ago.
>> tom: we have yet to see a positive session in the month of september for the major stock indices. here's today's trading for the dow. the lowest level was hit just before 11 a.m. eastern time. by the close, the index had dug itself partially out of that hole, ending with a loss of about 100 points. banking stocks again saw the brunt of the selling. bank of america and j.p. morgan each fell more than 3%. citi dropped 2.5%. today was the first trading day after the federal government announced late friday it was suing several banks, including these three, over mortgage securities gone bad. after the close, bank of america announced a management shakeup, including one of the most powerful and recognizable women on wall street. sally krawcheck, leader of b. of a.'s global wealth and
investment management unit, is leaving. also leaving? the head of consumer and small business banking, joe price. of the 10 major sectors, only health care registered a gain. this healthcare exchange-traded fund traded up just eight cents, but on 2.5 times its usual trading pace. the best dow stocks were health care. pfizer and johnson & johnson gained about 1%. j&j initially was down on news. this morning, the f.d.a. staff recommended not okaying a blood thinning drug for certain patients. an advisory panel is due to vote later this week. big news in the international currency markets. the swiss national bank intervened, hoping to limit its currency rally. it capped the exchange rate between the franc and the euro hoping to bring down the franc. the move initially helps the euro which has been dropping in value thanks to european
government debt problems. the swiss franc has been a safe haven. this chart shows the euro versus the swiss franc. as the euro has dropped, that has lifted the franc, until today, when switzerland said it won't allow its currency go below 1.20 euro. ira epstein at the linn group says today's swiss action helps the dollar, at least for a couple of days. >> tom: the dollar gets a bid because we're worried about the near term, and then we'll switch gears after the president's speech wondering what's up with our own fed, and the dollar's rally could be extremely short lived if the fed puts out another qe 3 type program because we debase our currency again. qe a reference to quantitative easing. with the currency intervention, a lot of folks on gold, and we did see a climb to its most recent high
actually hitting over $1900 an ounce, and gold with a small drop, still closing around $1873 an ounce. meantime energy company sunoco with a nice rally. the company nots out of the refinery business. its two pennsylvania refineries are for sale. and speaking of deals, packaging company temple inland shot up 25% as it reached a deal with international paper two months after i.p. made a hostile bid. the price is $32 dollars per share. the buyer, i.p., also jumped-- up almost 9%. and that's tonight's "market focus."
it was one year ago this month that movie rental company blockbuster went bust. its brick and mortar business was upended by the dvds-through- the-mail-and-over-the-internet strategy of netflix. that brings us to tonight's "word on the street," "revenge." jeanine poggi is a reporter at thestreet.com. >> tom: so how could blockbuster extract revenge on netflix a year after it fell into bankruptcy? >> you know, it's a big surprise, but we have to credit dish network which purchased blockbuster out of bankruptcy in april, and evolving the company and taking it to new levels, doing to it what should have been done years ago, and now it
seems like bloc bust ser going to launch its own streaming video service. that's going to the first competition netflix will face. >> talk about the vulnerability of netflix. it announced an unpopular fee increase. we'll take a look at the chart of netflix. it's well off the highs. it announced it won't have the stars content in the first quarter. how vulnerable is it? >> netflix is very vulnerable. but it's six months away. it's very likely they can still strike a deal with stars. but nonetheless, even if the deal is struck, it puts netflix in a position. netflix no longer holds all the cards, and paying more for contenlt or accept less content. at this point, we've seen an outcry from consumers. they're not willing to accept less. if the deal isn't struck, it's
even worse. stars is a dominant player for new content. turn this around for dish network which owns blockbuster. how does it fit into the strategy that most see as a satellite distribution company. >> repositioning the brand from a satellite company to really a video service company, and blockbuster clearly wilts in there and pults it in prime position with netflix. on top of this it looks like dish network will take streaming to a new level. and make several acquisitions in wire ms and broadband the next couple of years. it's positioning to compete. do yo>> tom: do you have any
position on netflix? >> no position on the stock. >> tom: you can read this article at the street.com. and on our website as well. revenge on netflix. our guest jeanine poggi. >> susie: and for tomorrow, a sfap shot of economic activity around the country by the beige book report. a global strategist at j.p. morgan private bank joins us to talk about the global economy and where to invest n. the money file, why reading is fundamental when it comes to our investment. it's neither snow, nor rain, nor heat, nor gloom of night that's threatening the demise of the u.s. post office. instead, it could be a lack of money. the post office is running a $9 billion annual deficit and doesn't have the $5.5 billion it must pay for retiree health benefits due september 30. the solution? postmaster general patrick
donahoe wants to end saturday mail delivery, close 3,700 locations and lay off 120,000 workers. >> tom: another legal settlement involving mortgages. bond insurer m.b.i.a. and two top executives agreed to pay $68 million in cash to settle lawsuits. the cases accused them of misleading investors about exposure to risky residential mortgage debt. smaller rival ambac financial, its insurers and some banks earlier this year agreed to pay $33 million to settle similar claims. >> susie: as we mentioned earlier, jobs, and specifically
>> susie: as we mentioned earlier, jobs, and specifically job creation, take center stage this week, culiminating with president obama's speech before congress on thursday. but tonight's commentator thinks the president should focus elsewhere. he's stuart kirk, deputy editor of the "financial times'" lex column. >> this week, all eyes are focused on president obama's jobs speech on thursday. it is doubtful that investors expect much on the day, although those who are heavily overweight whether or not the speech can more important to markets is whether or not the speech can kick-start mr. obama's re- election campaign. it is understandable that the president is worried about the economy-- he's not stupid, last week's payrolls report looked ugly, and the recent downgrades to g.d.p. suggest that mr. obama is not about to receive a boost in the polls from growth any time soon. but everyone must avoid becoming too distracted about jobs.
for a start, last friday's numbers were affected by a large strike and by seasonal factors adjust for these and the private sector added 60,000 jobs in august. not amazing, but hardly dire either. and if energy prices edge lower, u.s. companies may even start to feel more confident again. nor can mr. obama lose his focus. the reality is that his big problem may not be growth, but rather america's 75 million owner-occupied houses, 65% of which have a mortgage. if he introduces measures to help the quarter of these mortgages which are drowning in negative equity, he risks alienating the millions of hard- working voters who have diligently kept their heads above water. but if he does not fix the mortgage problem, the economy may languish for years. president obama is damned if he does, or doesn't, on housing. no wonder he'd rather talk about jobs. i'm stuart kirk. >> tom: that's "nightly business report" for tuesday, september 6. i'm tom hudson. good night everyone, and good night to you too, susie.
>> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program was made possible this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org